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TMI Blog1985 (4) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... essee also gifted 137 shares per share. The assessee also gifted 137 shares of Nageswara Rao Eastes (P.) Ltd. The assessee sought to deduct from the value arrived at by the break-up method 25 per cent of the break-up value on the ground that such deduction was warranted under rule 1-D of the Wealth-tax Rules. The GTO took the view that the Wealth-tax Rules were applicable for the specific purpose of valuation under that Act and a similar discount could not be given in respect of valuations made under the Gift-tax Act. He, therefore, did not allow any discount for the value of the shares of Nageswara Rao Estates (P.) Ltd. and took the valuation of Rs. 447 per share. 2. The assessee appealed. The AAC referred to the decision of the Mysore H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as holder subject to the articles, but the fact that a special buyer would for his own special reasons give a higher price than the price in the open market shall be disregarded." Therefore, the valuation of shares of Nageswara Rao Estates ( P) Ltd., would have to be considered in the light of the aforesaid rule. Mathematically it is possible to always ascertain the value of any share in with reference to the value of total assets. The cases in which the value of is not as certain able by reference to the value the total assets of the company would be those cases where a commercially realistic market value would not result if the mere arithmetical basis is adopted. Where there are restrictive provisions in the matter of transfer, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raham v. Federal Commissioner of Taxation (70 C.L.R. 23) suggested the adoption of depreciated value wherever there are restrictions on the transfer of shares as also on the price. Therefore, the value ascertained on the basis of a break-up method has to be depreciated to some extent having regard to the restrictions contained in the articles of association, which have a tendency to bring down the price in an open market sale." Having examined the case from the aforesaid angle, we are of the view that a discount of 25 per cent is not excessive especially when no dividends had been declared in the immediate past by the company. Therefore, we hold that the value computed by the break-up value would be discounted by 25 per cent in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to our notice such as no declaration of dividends was made in the past. As a matter of fact, though on one hand the assessee had contended that the sale price alone should be taken as the market value, it was specifically stated in the grounds of appeal before the AAC that at least a discount of 15 per cent should be given. Having regard to the facts stated, we consider that the value of Rs. 372 per share can be discounted by 15 per cent. This would give in round figures a value of Rs. 317 per share. We direct that this value be taken. In the view that we have taken on merits it is not necessary for us to express any final opinion on the abstract proposition as to whether under rule 1D of the Wealth-tax Rules the value could be comput ..... X X X X Extracts X X X X X X X X Extracts X X X X
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